The American Bankers Association (ABA) has pushed back against a recent White House study by the Council of Economic Advisers (CEA), warning that policymakers are dangerously underestimating the threat that yield-bearing stablecoins pose to traditional banking. The dispute centers on whether stablecoins should be allowed to offer interest-like returns and whether those returns will trigger a structural shift of deposits away from community banks.
The White House Study: Minimal Impact from a Ban
Released on April 13, the CEA study concluded that prohibiting stablecoin yields would boost bank lending by a mere 0.02%, a change that falls well within normal quarterly fluctuations. The analysis framed yield restrictions as having limited short-term effects, reinforcing the view that current stablecoin activity does not materially disrupt aggregate lending or deposit stability.
But the ABA strongly disagrees with this interpretation. In an article written by ABA chief economist Sayee Srinavasan and Vice President Yikai Wang, the association argued: “Policymakers should not take comfort from a study showing that prohibiting stablecoin yield might have a small, near-term effect on aggregate lending.” They added: “That is not the contested scenario. The contested scenario is whether allowing yield on payment stablecoins will accelerate deposit migration — especially from community banks — raising funding costs and reducing local credit.”
Scale as the Critical Risk Factor
The ABA emphasized that the CEA paper’s baseline — a stablecoin market of about $300 billion — does not reflect a future where the market grows to $1 trillion to $2 trillion. In a larger market, yield becomes the primary driver of deposit outflows rather than a secondary feature. ABA analysis suggests that in a state like Iowa, the reduction in lending could reach $4.4 billion to $8.7 billion, severely impacting community banks that rely on stable deposit bases to fund local loans.
“The CEA paper minimizes the core risk by starting from the wrong question. There is already ample evidence and analysis showing that a prohibition on yield for payment stablecoins is a prudent safeguard,” the ABA authors wrote.
Policy Implications: Prudent Safeguards vs. Innovation
The ABA warns that without targeted safeguards, rising funding costs could constrain lending capacity across community banking networks and regional economies. They argue that banning yield on payment stablecoins would allow the asset class to mature as a payments innovation rather than “an economically risky substitute for insured bank deposits.”
The clash underscores a deepening policy stalemate in the U.S. over how to regulate digital assets. While the White House focuses on near-term aggregate data, industry groups warn of long-term structural risks. As the stablecoin market continues to expand, the debate over yield is likely to intensify, with significant implications for financial stability and banking regulation.